[2026] Vietnam Tax Incentives for Startups and Newly Established Businesses
August 03, 2026
![[2026] Vietnam Tax Incentives for Startups and Newly Established Businesses](https://fareast-legal.com/wp-content/uploads/2026/08/pexels-photo-33719831-33719831-1024x682.jpg "[2026] Vietnam Tax Incentives for Startups and Newly Established Businesses 1")
Vietnam enters 2026 with one of the most significant rounds of tax reform in recent years. A new corporate income tax law, revised implementing decrees, an extended VAT reduction, and a substantial increase to personal income tax deductions have taken effect within a short span of one another, together reshaping the tax landscape for startups and early-stage companies.
For founders and investors evaluating market entry or restructuring an existing operation, these changes carry practical consequences well beyond compliance. Correctly identifying which incentives apply — and to which entity, at which stage — can materially affect after-tax returns, hiring costs, and pricing strategy. This memorandum summarizes the principal incentives currently in force across corporate income tax, value-added tax, and personal income tax.
Corporate Income Tax
The standard corporate income tax rate from 2026 remains 20%, as set out in Law No. 67/2025/QH15 on Corporate Income Tax. A number of preferential regimes, however, apply below this baseline.
Incentives for Encouraged Sectors and Locations
The most favorable regime applies to enterprises investing in sectors or locations the State has designated for priority development, including:
- Investment projects located in areas facing socio-economic difficulties or extreme difficulties;
- High-technology enterprises and enterprises operating within high-tech parks or concentrated information technology zones;
- Projects in the environmental protection sector, including waste treatment, recycling, and renewable energy.
Qualifying enterprises are generally entitled to a 10% tax rate for a period of fifteen years, together with a four-year tax exemption from the first year of taxable income and a 50% reduction for the following nine years. Eligibility turns on whether the specific project falls within the list of encouraged sectors and locations under Decree No. 320/2025/ND-CP, and this threshold question warrants careful review before any incentive is claimed.
Reduced Rates for Small and Medium Enterprises
Article 10 of Law No. 67/2025/QH15 introduces a tiered rate structure based on annual revenue:
| Annual revenue | Applicable rate |
|---|---|
| Up to VND 3 billion | 15% |
| Above VND 3 billion up to VND 50 billion | 17% |
| Above VND 50 billion (standard rate) | 20% |
Unlike the exemptions discussed below, this reduced-rate regime applies on an ongoing basis by reference to annual revenue, without a fixed expiration.
Three-Year Exemption for Newly Established SMEs
Under Article 10 of Resolution No. 198/2025/QH15, a small or medium enterprise is entitled to a three-year exemption from corporate income tax, calculated from the date of its first enterprise registration certificate.
Enterprises whose registration certificates were issued before 17 May 2025 and that had not yet exhausted their exemption entitlement under the prior regime are permitted to carry that remaining entitlement forward under transitional rules.
Exemption on Revenue Below VND 1 Billion
Separately, current law provides an exemption on the portion of taxable income corresponding to annual revenue below VND 1 billion, targeted principally at micro-enterprises and household businesses converting into corporate form. Enterprises relying on this exemption should maintain segregated accounting for the qualifying revenue stream to substantiate the claim at the time of finalization.
Incentives for Innovative Startups
A distinct regime applies to innovative startup enterprises, fund management companies operating startup investment funds, and intermediary organizations supporting the innovation ecosystem. These entities benefit from a two-year exemption followed by a 50% reduction for the subsequent four years, applicable from the 2025 tax period onward.
Qualification for this regime is narrower than the general SME exemption and turns on innovation-specific criteria under sector-specific regulations. It is, however, paired with additional personal income tax relief for founders, employees, and investors, discussed below.
Summary Table
| Category | Incentive | Legal basis |
|---|---|---|
| Encouraged sectors/locations | 10% rate for 15 years; 4-year exemption, 50% reduction for 9 years | Decree 320/2025/ND-CP |
| SME reduced rate | 15% (≤ VND 3bn) or 17% (VND 3bn–50bn) | Law 67/2025/QH15 |
| Newly established SME | 3-year exemption from registration date | Resolution 198/2025/QH15 |
| Innovative startup | 2-year exemption, 50% reduction for 4 years | Effective 2025 tax period |
| Revenue below VND 1 billion | Exemption on qualifying portion | Segregated accounting required |
These regimes do not automatically stack. An enterprise should determine the single most advantageous and applicable basis for its circumstances, and assemble the supporting documentation accordingly, rather than assuming cumulative entitlement across categories.
Value-Added Tax
The Reduced 8% Rate
Under Resolution No. 204/2025/QH15 and Decree No. 174/2025/ND-CP, the standard VAT rate remains reduced by two percentage points — from 10% to 8% — for the period from 1 July 2025 through 31 December 2026. This extended window is notably longer than the six-to-twelve-month reductions Vietnam has implemented in prior years, giving businesses greater certainty for medium-term pricing and planning.
The reduced rate applies uniformly at the import, manufacturing, processing, and trading stages. No separate registration is required; a business need only confirm that the specific goods or services it supplies fall within the eligible categories before issuing invoices at the reduced rate.
Excluded Sectors
Not all goods and services otherwise subject to 10% VAT qualify for the reduction. Under the appendices to Decree No. 174/2025/ND-CP, the following remain taxed at the standard 10% rate:
- Telecommunications;
- Financial services, banking, securities, and insurance;
- Real estate business;
- Metal products and mining products (other than coal);
- Goods and services subject to special consumption tax (other than petrol).
Startups operating in information technology, software, digital transformation, and logistics — sectors that fall within the scope of this round of reduction — should confirm the precise classification of each product or service line before applying the reduced rate.
Personal Income Tax on Employment Income
The Revised Family Circumstance Deductions
Effective 1 January 2026, Resolution No. 110/2025/UBTVQH15 raises the family circumstance deduction by approximately 40%:
| Category | Prior threshold (through 31 Dec 2025) | New threshold (from 1 Jan 2026) |
|---|---|---|
| Taxpayer (self) | VND 11,000,000/month | VND 15,500,000/month (VND 186,000,000/year) |
| Each dependent | VND 4,400,000/month | VND 6,200,000/month (VND 74,400,000/year) |
The practical effect is significant: for illustration, an unmarried individual earning approximately VND 17,000,000 per month will, after mandatory insurance contributions and the increased personal deduction, incur no personal income tax liability for the 2026 tax year.
For employers, this change eases pressure in gross-to-net salary negotiations and increases employees’ effective take-home pay without any corresponding increase in employer cost.
Timing: The 2025 annual finalization, carried out in early 2026, still applies the prior deduction thresholds (VND 11,000,000 / VND 4,400,000). The revised thresholds apply only to income earned from 1 January 2026 onward.
Incentives Specific to the Startup Ecosystem
Beyond the general deduction increase, the law provides targeted personal income tax relief within the innovation ecosystem:
- Exemption on gains from the transfer of capital contributions or shares in innovative startup enterprises, effective from 17 May 2025 — a meaningful benefit for angel investors and venture funds on exit.
- A two-year exemption followed by a 50% reduction for the following four years on employment income earned by experts and scientists engaged on innovative startup projects, allowing startups to compete for senior technical talent without absorbing the full tax cost on that compensation.
Practical Considerations
Entitlement to an incentive on paper and its safe application in practice are two different matters. Enterprises should keep the following in mind:
- Assemble supporting documentation at the outset — including corroborating evidence of sector, location, or innovation-related eligibility criteria, as applicable to the specific incentive being relied upon.
- Maintain segregated accounting for income or revenue benefiting from preferential treatment, distinct from income taxed at the standard rate, to support the position on finalization and in any subsequent tax authority review.
- Retain complete invoicing and accounting records for transactions taxed at the reduced VAT rate, an area tax authorities routinely scrutinize during inspection.
- Confirm the correct trigger date for exemption periods — a common and costly error is conflating the date of incorporation with the date the first taxable income arises, which can result in retroactive assessment upon finalization.
- Do not assume incentives are cumulative across categories absent an express legal basis; the applicable regime should be confirmed before it is relied upon.
Frequently Asked Questions
Which deduction thresholds apply when finalizing 2025 personal income tax for employees?
Income earned in 2025 remains subject to the prior thresholds (VND 11,000,000 for the taxpayer, VND 4,400,000 per dependent). The revised thresholds apply only to income earned from 1 January 2026 onward.
Do foreign-invested enterprises qualify for the sector- and location-based corporate income tax incentives?
Yes. These incentives apply without distinction between domestic and foreign-invested enterprises, provided the investment project meets the applicable sector or location criteria. Foreign-invested enterprises should cross-check the scope of incentives already recorded on their Investment Registration Certificate.
How is “innovative startup” status determined for purposes of these incentives?
Qualification depends on sector-specific criteria relating to the innovative character of the business model, product, or technology — not merely on the company’s stated field of business. This threshold should be confirmed carefully, ideally with legal advice, before the innovative-startup regime is relied upon, given the exposure that follows from a misapplied claim.
Which sectors are excluded from the reduced 8% VAT rate?
Telecommunications, financial services (banking, securities, insurance), real estate, metal and mining products (other than coal), and goods or services subject to special consumption tax (other than petrol) remain taxed at the standard 10% rate.
Conclusion
2026 presents an unusually favorable convergence of tax incentives for startups and early-stage businesses in Vietnam, spanning corporate income tax exemptions and reduced rates, an extended VAT reduction through the end of the year, and a substantially increased personal income tax deduction. The complexity of this framework — spread across multiple legal instruments, each with distinct eligibility criteria — makes careful upfront analysis essential to both capturing the available benefit and avoiding exposure from a misapplied claim.
Far East Legal advises founders and investors on structuring new ventures to take full advantage of the incentives currently available, and on the compliance measures required to sustain that position through subsequent tax review.
Đạt Nguyễn (Tony)
Marriage Law
FREE LEGAL CONSULTATION
Email: admin@fareast-legal.com
Phone: 0981 414 721
232 Nguyen Luong Bang, Tan My Ward, HCMC, Vietnam
